A couple days ago I happened to be reading an article in the Atlanta Journal regarding the market in Panama City. There was a quote from Janet Roan, a local (PC, not Atl) real estate agent - "Now is the time to buy. It's a buyer's market." But she says, "If you are looking to buy something to flip it, don't even try it right now."
The catch? That article was from April 16, 2006.
There was another guy who had put contracts on 3 units in Panama City towers, pre-construction, each in the low 200k range. The article says the prices had tripled and then fell back but were still above his contract price. He said at the time he still expected to be able to sell at a comfortable profit although they were not yet completed. He was worried at the time that they may be overdeveloping the Panama City Beach area.
I'd like to see the AJC or some other organization do some follow up stories and talk to some of the same people interviewed previously. What does that agent think now? Did that guy close on his 3 properties and sell them or did he walk from his deposits? Is he stuck in 3 condos, eating a monthly mortgage while taking in some little bit of rent?
Replies
388
SoWal Insider
Oh boy, I always hesitate making detailed posts becasue you then have to defend the numbers.
Anyway, the tax records are not up to date with the latest sales. 104 and 402 sold in the last month for $244,900 and $250,000 respectively. There is also at least one 3 bedroom that sold for much higher.
It is without a doubt a trainwreck. They are selling at less than 40 cents on the dollar from the peak. (WWWBD)
Flyguy
You know the more I think about it, the more I'm thinking you might have something here. Since condos are cheaper than housing, the condo market here was probably hit hard by the subprime implosion (peaking right now). Housing on the other hand around here is mostly 3/7/5 teaser rate or pick-a-pay ARMs, which should have three "default" peaks. One that is building right now on loans that reset in 07/08 (3 year), another major peak that will hit 09/10 (5 year) and yet another that will hit in 11/12 (7 year). So who knows, maybe the smart investor today is shopping condos instead of single family homes since housing is "just getting started"?
Beach Fanatic
In light of:
I would think that
I don't mean 30a.
Maybe this is the difference in our calculations, my assumption was that the debt service was not included in the 20K? If that's the case, then his carry costs are not 20K, they are 6K per year. That changes things a bit -and:
appreciation - after tax return
3% - 11.4%
4% - 13%
5% - 14.6%
Which is a good investment. Is 6K a year for all ownership costs outside of the interest on the 30 year loan reasonable for a condo? I've never seen anything that low in the few condos I've looked at. It's usually much higher, around 10K-17K annually for a new development.
You know the more I think about it, the more I'm thinking you might have something here. Since condos are cheaper than housing, the condo market here was probably hit hard by the subprime implosion (peaking right now). Housing on the other hand around here is mostly 3/7/5 teaser rate or pick-a-pay ARMs, which should have three "default" peaks. One that is building right now on loans that reset in 07/08 (3 year), another major peak that will hit 09/10 (5 year) and yet another that will hit in 11/12 (7 year). So who knows, maybe the smart investor today is shopping condos instead of single family homes since housing is "just getting started"?
I would think that
30A's calculation makes more sense than yours in this situation. Your calculation assumes the only amount at risk is the initial down payment. In actuality, the entire purchase price of $245k is at risk--the lender has full recourse against the borrower for the amount of the mortgage. If the value of the condo sinks to $150k, the borrower has lost not only the equity investment but also part of the borrowed capital.Some folks might would feel silly.
Therefore, the return calculation should be based on the total capital invested--not just the equity investment. The return on equity calculation works in a situation where there is no recourse to the borrower for the borrowed capital.
I don't mean 30a.Beach Fanatic
A stock's value can fall to zero, a shorted stock can rise forever, a bond can be defauted on etc.. The full recourse you mention would be the equivalent of a big margin call, no? If you want to calculate without leverage then please do so but that isn't what was demonstrated.
If I did the math correctly, 30A did his return analysis based on total invested capital--not simply the cash invested in the down payment.
And, yes, I believe it is most appropriate to compute returns on total capital placed at risk on any investment.
Full recourse debt is the same as taking your own cash and plunking it down to make an investment. On the other hand, I think looking at returns on equity is appropriate where the only at risk amount is the cash you put in (and non recourse debt is utiltized to finance the remainder of the transaction).
Beach Fanatic
As I stated in another post, as a pure investment you can probably do better than this. But if you are an end user you would have a gulf front condo to enjoy for part of the year, and that has to be worth something.
JMHO,
Flyguy
No doubt about it--the enjoyment factor is definitely worth a lot! You can't place a value on the memories built from ownership of a beach/lake/mountain home.
SoWal Insider
All I did was stay at a Holiday Inn Express! Don't quote me on that! 
Beach Fanatic
hitting bottom
there are still alot of folks around here who just don't get it. they still want 2004 prices for their homes, which is keeping the inventory high. in so many other parts of the country, making $70,000 or $80,000 on your home after owning it for 10 years is considered a good profit. here, there are too many greedy people - they want that kind of return after owning for a couple of years. wake up, people - as long as there are tons of properties on the market, things won't get better. it's the old supply and demand rule.
there are still alot of folks around here who just don't get it. they still want 2004 prices for their homes, which is keeping the inventory high. in so many other parts of the country, making $70,000 or $80,000 on your home after owning it for 10 years is considered a good profit. here, there are too many greedy people - they want that kind of return after owning for a couple of years. wake up, people - as long as there are tons of properties on the market, things won't get better. it's the old supply and demand rule.
Skunky
I had a nice chat with a lady this morning in Seacrest Beach. She and her husband have just bought a house here. She was so happy, and she told me this purchase was the fulfillment of a 'lifetime dream'. What we both got a chuckle out of was the fact that the seller had to bring $200k to the table just to unload the property! Ouch...
SoWal Insider
I had a nice chat with a lady this morning in Seacrest Beach. She and her husband have just bought a house here. She was so happy, and she told me this purchase was the fulfillment of a 'lifetime dream'. What we both got a chuckle out of was the fact that the seller had to bring $200k to the table just to unload the property! Ouch...
Seacrest Beach North, Waters Edge at Seacrest, and Sunset Beach are poster children for what shellak mentions. A large percentage of lots were purchased, built out, and flipped between 2004 and 2007. In some cases properties were flipped two or three times. Very creative financing like 3/5/7 hybrid ARMs, interest only, PayOption and teasers were used. The community has seen a large jump in active listings in just the last year or so. Unfortunately, most are listing at overvalued prices, so sales are flat. The sales that are going through are reasonably priced, small 3 bed, 3 bath units. The "shake out" is just starting to kick into high gear there.
Beach Fanatic
This is worth reading....from today's New York Times.
http://www.nytimes.com/2008/05/31/b...ta1&adxnnlx=1212267144-XuLJqGzgsmF84ciPHGyQ4Q
http://www.nytimes.com/2008/05/31/b...ta1&adxnnlx=1212267144-XuLJqGzgsmF84ciPHGyQ4Q
Beach Fanatic
This is worth reading....from today's New York Times.
http://www.nytimes.com/2008/05/31/b...ta1&adxnnlx=1212267144-XuLJqGzgsmF84ciPHGyQ4Q
That's funny.
SoWal Insider
This is worth reading....from today's New York Times.
http://www.nytimes.com/2008/05/31/b...ta1&adxnnlx=1212267144-XuLJqGzgsmF84ciPHGyQ4Q
Quote:
"I drafted a sample letter that buyers who fear overpaying might send to homeowners. Then, I crafted a reply that confident sellers could fire back.
The sample letters on Page B6, ...I wrote after conversations with representatives of the National Association of Realtors and the National Association of Exclusive Buyer Agents" :roll:
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Writing letters is a waste of time--just hand over a business card with the offer and a one-week deadline jotted on the reverse.
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Beach Fanatic
Quote:
"I drafted a sample letter that buyers who fear overpaying might send to homeowners. Then, I crafted a reply that confident sellers could fire back.
The sample letters on Page B6, ...I wrote after conversations with representatives of the National Association of Realtors and the National Association of Exclusive Buyer Agents" :roll:
----------------------
Writing letters is a waste of time--just hand over a business card with the offer and a one-week deadline jotted on the reverse.
.
Now Shelly, surely regardless of our trade, we all need tips on negotiating skills;-)
Edited
Beach Fanatic
Quote:
"I drafted a sample letter that buyers who fear overpaying might send to homeowners. Then, I crafted a reply that confident sellers could fire back.
The sample letters on Page B6, ...I wrote after conversations with representatives of the National Association of Realtors and the National Association of Exclusive Buyer Agents" :roll:
----------------------
Writing letters is a waste of time--just hand over a business card with the offer and a one-week deadline jotted on the reverse.
.
Thanks Shelly! I think I will actually use this when I deliver a contract in the am. You da bomb!
SoWal Insider
Thanks Shelly! I think I will actually use this when I deliver a contract in the am. You da bomb!
is it the one I might know about?Beach Fanatic
Nope. We are working on that one. I will keep you posted. Been pretty slammed.
SoWal Insider
Thanks Shelly! I think I will actually use this when I deliver a contract in the am. You da bomb!
You know you can always count on me
.The look on the seller's face when you present the card and walk away will be worth the price of admission (...ahh-- make that the price of commission).
.
Beach Lover
Gosh B...kinda suprised you may enjoy profiteering off the misery of others,and I'm not speaking of those with "false entitlement" issues.....or the Gentry/30a stansi.
m
m
Beach Fanatic
Gosh B...kinda suprised you may enjoy profiteering off the misery of others,and I'm not speaking of those with "false entitlement" issues.....or the Gentry/30a stansi.
m
Tis a joke Mark...
SoWal Insider
Tis a joke Mark...
I'll vouch for that....Bobby J keys my car every chance he gets.
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Edited
Beach Fanatic
I'll vouch for that....Bobby J keys my car every chance he gets.
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You do make me smile.
SoWal Insider
there are still alot of folks around here who just don't get it. they still want 2004 prices for their homes, which is keeping the inventory high. in so many other parts of the country, making $70,000 or $80,000 on your home after owning it for 10 years is considered a good profit. here, there are too many greedy people - they want that kind of return after owning for a couple of years. wake up, people - as long as there are tons of properties on the market, things won't get better. it's the old supply and demand rule.you can't compare other real estate markets to 30a unless you meet a long list of parameters, as 10 miles can put you in an entirely different set of buyers/sellers.
SoWal Insider
you can't compare other real estate markets to 30a unless you meet a long list of parameters, as 10 miles can put you in an entirely different set of buyers/sellers.
...at this point--mostly sellers.
.
SoWal Insider
where...what market? 30a?
Skunky
Beach Fanatic
...at this point--mostly sellers.
.
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